5 ms·

This is true, I'm waiting to buy (cash, no mortgage) still, not enough owner bankruptcies yet for me. I can wait until things can no longer operate under "exten

This is true, I'm waiting to buy (cash, no mortgage) still, not enough owner bankruptcies yet for me. I can wait until things can no longer operate under "extend and pretend".

polotics 6y ago
The market can stay irrational for much longer than you can stay solvent and/or alive.
- cinquemb 6y ago
  I've been working remote for 5 years, and I live in ~90m2 apt in jakarta paying what i had to pay to live in a 3 bdr apt in boston with 2 other grown men… made enough long tail risk on HY trash, going into the "pandemic", and will make more again when the bottom falls out and load up on all the garbage for ~8.5 cents on the dollar (current amount of HY that is collateralized coming due within then next 4.5-5 years). I hope it goes on longer, more time to build up more leverage selling trash to folks who believe oft repeated things as if they were the word of god.
  - colordrops 6y ago
    I must admit I'm an engineer and not a financial person, and am having a hard time understanding this. Are these correct: long tail risk: assets that have problems that take a long time to affect the price HY: high yield, meaning they change quickly in price by large percentages and can make more money quickly trash: low priced stocks for crappy companies bottom falls out: market takes a dive garbage: same thing as trash collateralized HY coming due: investments backed by assets that will default leverage: money "oft repeated things": aphorisms about finance that are often wrong, in this case the poster you replied to's comment. I'm probably wrong on half of this and I still don't really get what you are saying. Excuse my ignorance.
    - cinquemb 6y ago
      No worries, before i worked in finance (wrote code/developed models to trade futures on daily tf for a firm in RI for about a year), I was only vaguely aware of some of these things > long tail risk: assets that have problems that take a long time to affect the price Not necessarily, could be any asset or derivative that could be susceptible to experiencing large declines in return relative to normal conditions during certain periods of time > HY: high yield, meaning they change quickly in price by large percentages and can make more money quickly No, high yield bonds. Avg yield on 4.5-5 year maturing ones right now is about 6%. Or at least the 1217 cusips I track ASOF mon close. > trash: low priced stocks for crappy companies Not just stocks, but yes > garbage: same thing ^^^ > collateralized HY coming due: investments backed by assets that will default about 91.8% of HY bonds coming due in 4.5-5 years are not backed by any collateral. "Will default" is subjective, but my work has about 61% have a good chance of default (from ratings, current price of the bonds, 10-q/10k data available), not including liquidity premiums/discounts for people who "want out now", not including leverage actors take when buying/lending such now like they do. > leverage: money Borrowing money in order to increase ones exposure (or contracts that act as such), larger returns/drawdowns are expected if (not) managed properly compared to not borrowing to finance a position (or buying the underlying out right in cash). > "oft repeated things": aphorisms about finance that are often wrong Or wrong in certain contexts.
chii 6y ago
> not enough owner bankruptcies yet for me Under the efficient market hypothesis, if the prices are dropping because of many bankruptcies forcing a sale, you will also feel that the price is not worth buying, or if there's actually little to low risk, then the price would get bid up by many buyers (assuming all buyers are perfectly rational).
- cinquemb 6y ago
  > Under the efficient market hypothesis… (assuming all buyers are perfectly rational) textbook vs reality… having a rational for buying something is not the same as an objectively rational choice.
nemo44x 6y ago
Making a cash offer is a good idea (gives seller assurance since there’s no reliance on a mortgage going through) but in today’s climate of low interest rates would be a poor move financially. Imagine a $500k house. If you paid cash then you save interest payments and you could invest that into other things. But paying $100k and keeping the other $400k to invest will out perform the former strategy considering today’s interest rates of 3%. If rates go way up then home asking prices will fall and a cash purpose begins to make more sense. But they haven’t for nearly 40 years. And there’s more money than ever out there which means there is less demand to borrow it which means interest rates continue to fall as the bid drops since there are so many eager lenders.
- ghaff 6y ago
  There are also tax benefits to the mortgage route.
  - hiram112 6y ago
    A lot of the advantages of deducting mortgage interest and state property taxes are no longer the benefit they once were: * historically low interest rates in the last ten years means the actual amount of interest you're paying each month vs principle is not that high. * Tax Cuts and Jobs Act reduced the amount of property tax deductions that were typically available in HCOL blue states like NY and California. * Standard deduction increase (also part of Tax Cuts and Jobs Act) was increased so high that many would be now be better off not even bothering to itemize deductions, even if they had a mortgage. When I was thinking of buying in about 2017, I did the math, and due to the low interest rates and the lack of any other deductions, neither mortgage interest nor state property taxes would have been high enough to offset the standard deduction. In effect, not a single tax advantage would be available to me with buying a house vs just continuing to rent.
    - ghaff 6y ago
      Fair enough. It certainly depends on how much interest you're paying and what your tax situation looks like.

This is true, I'm waiting to buy (cash, no mortgage) still, not enough owner bankruptcies yet for me. I can wait until things can no longer operate under "extend and pretend".

polotics 6y ago

The market can stay irrational for much longer than you can stay solvent and/or alive.

cinquemb 6y ago
I've been working remote for 5 years, and I live in ~90m2 apt in jakarta paying what i had to pay to live in a 3 bdr apt in boston with 2 other grown men… made enough long tail risk on HY trash, going into the "pandemic", and will make more again when the bottom falls out and load up on all the garbage for ~8.5 cents on the dollar (current amount of HY that is collateralized coming due within then next 4.5-5 years). I hope it goes on longer, more time to build up more leverage selling trash to folks who believe oft repeated things as if they were the word of god.
- colordrops 6y ago
  I must admit I'm an engineer and not a financial person, and am having a hard time understanding this. Are these correct: long tail risk: assets that have problems that take a long time to affect the price HY: high yield, meaning they change quickly in price by large percentages and can make more money quickly trash: low priced stocks for crappy companies bottom falls out: market takes a dive garbage: same thing as trash collateralized HY coming due: investments backed by assets that will default leverage: money "oft repeated things": aphorisms about finance that are often wrong, in this case the poster you replied to's comment. I'm probably wrong on half of this and I still don't really get what you are saying. Excuse my ignorance.
  - cinquemb 6y ago
    No worries, before i worked in finance (wrote code/developed models to trade futures on daily tf for a firm in RI for about a year), I was only vaguely aware of some of these things > long tail risk: assets that have problems that take a long time to affect the price Not necessarily, could be any asset or derivative that could be susceptible to experiencing large declines in return relative to normal conditions during certain periods of time > HY: high yield, meaning they change quickly in price by large percentages and can make more money quickly No, high yield bonds. Avg yield on 4.5-5 year maturing ones right now is about 6%. Or at least the 1217 cusips I track ASOF mon close. > trash: low priced stocks for crappy companies Not just stocks, but yes > garbage: same thing ^^^ > collateralized HY coming due: investments backed by assets that will default about 91.8% of HY bonds coming due in 4.5-5 years are not backed by any collateral. "Will default" is subjective, but my work has about 61% have a good chance of default (from ratings, current price of the bonds, 10-q/10k data available), not including liquidity premiums/discounts for people who "want out now", not including leverage actors take when buying/lending such now like they do. > leverage: money Borrowing money in order to increase ones exposure (or contracts that act as such), larger returns/drawdowns are expected if (not) managed properly compared to not borrowing to finance a position (or buying the underlying out right in cash). > "oft repeated things": aphorisms about finance that are often wrong Or wrong in certain contexts.

chii 6y ago

> not enough owner bankruptcies yet for me Under the efficient market hypothesis, if the prices are dropping because of many bankruptcies forcing a sale, you will also feel that the price is not worth buying, or if there's actually little to low risk, then the price would get bid up by many buyers (assuming all buyers are perfectly rational).

cinquemb 6y ago
> Under the efficient market hypothesis… (assuming all buyers are perfectly rational) textbook vs reality… having a rational for buying something is not the same as an objectively rational choice.

nemo44x 6y ago

Making a cash offer is a good idea (gives seller assurance since there’s no reliance on a mortgage going through) but in today’s climate of low interest rates would be a poor move financially. Imagine a $500k house. If you paid cash then you save interest payments and you could invest that into other things. But paying $100k and keeping the other $400k to invest will out perform the former strategy considering today’s interest rates of 3%. If rates go way up then home asking prices will fall and a cash purpose begins to make more sense. But they haven’t for nearly 40 years. And there’s more money than ever out there which means there is less demand to borrow it which means interest rates continue to fall as the bid drops since there are so many eager lenders.

ghaff 6y ago
There are also tax benefits to the mortgage route.
- hiram112 6y ago
  A lot of the advantages of deducting mortgage interest and state property taxes are no longer the benefit they once were: * historically low interest rates in the last ten years means the actual amount of interest you're paying each month vs principle is not that high. * Tax Cuts and Jobs Act reduced the amount of property tax deductions that were typically available in HCOL blue states like NY and California. * Standard deduction increase (also part of Tax Cuts and Jobs Act) was increased so high that many would be now be better off not even bothering to itemize deductions, even if they had a mortgage. When I was thinking of buying in about 2017, I did the math, and due to the low interest rates and the lack of any other deductions, neither mortgage interest nor state property taxes would have been high enough to offset the standard deduction. In effect, not a single tax advantage would be available to me with buying a house vs just continuing to rent.
  - ghaff 6y ago
    Fair enough. It certainly depends on how much interest you're paying and what your tax situation looks like.